The Japanese Economic Output Declines as Exports Face Impact by American Tariffs
Japan's economy has recorded a decline for the initial time in a year and a half, largely driven by weakening overseas shipments due to newly imposed American tariffs.
G7 Growth Standings
The Japanese economy stands as the first Group of Seven nation to announce an output shrinkage in the previous quarter.
As the United States yet to publish its gross domestic product data for the third quarter, the current G7 economic standings show:
- France: 0.5 percent expansion
- UK: +0.1%
- Canadian economy: 0.1 percent (provisional estimate)
- Germany: zero growth
- Italy: no growth
- Japanese economy: negative 0.4 percent
Travel Stocks Decline amid Political Rift with China
In addition to the economic contraction, Japan is facing an intensifying diplomatic tension with China concerning Taiwan.
Stocks in Japan's travel and retail businesses have fallen sharply after China advised its residents to refrain from visiting to Japan.
This move by Chinese authorities intensified a diplomatic feud that was sparked by statements from Tokyo's recently appointed prime minister about the potential of deploying forces in the event of a potential Chinese attack on Taiwan.
The situation caused a wave of sell-offs across Japan's tourism-related shares.
- The Tokyo Disneyland operator stock dropped by 5.7 percent
- The department store chain tumbled by 11.3%
- The national carrier declined by 3.75%
"The ongoing tension over Taiwan and Beijing's advisory advising against visits to Japan creates near-term challenges for retail and hospitality sectors.
"Tourists from China account for roughly 25% of Japan's inbound traffic, making retail outlets, luxury retail, and tourism services particularly at risk."
Economic Contraction Details
Japanese gross domestic product fell by 0.4% in the third quarter, as industrial overseas shipments were affected by tariffs imposed by the US recently.
Exports were a key factor of the contraction, dropping by 1.2 percent compared with the April-June quarter, and were 4.5% lower than a year ago.
Earlier this year, the US administration had threatened Japan with a new 25 percent tariff on its goods, which was later lowered to 15% when the two countries reached a trade agreement.
Private demand also declined, by 0.3 percent quarter-on-quarter.
On an annual basis, Japan's GDP shrank by 1.8% in the three months through September.
"Japan's economy was stable in the initial six months of this year and today's GDP figures showed that growth is halted for now.
I expect Japan's economy to be returning on a gradual recovery trend going forward."
The White House has recently acknowledged the effect of tariffs on Americans, reducing duties on food imports including meat, tomatoes, coffee and fruits amid increasing concerns about rising costs.
Business Agenda
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